Hi, thanks for the reply, I have 3 sets of contacts, Phone, Google and Exchange, but only have phone active, and it totally disappeared! The google and exchange are there, but a bit scared if it would nuke the work exchange address book as well!!!

You need to go under your settings and uncheck the sync contacts with Google. Because google doesn't have any of your contacts and when it tries to back them up, it doesn't create new ones, so it deletes them all.

Thanks xCasulaty, but then would this mean that my Google contacts won't be backed up? Just very confusing, surprisingly the outlook calendar is still there, but contacts are gone. Just very confused as to how it works!

I have same problem
All of my "phone only" contacts have been removed from my contacts folder (which only showed after verizon moved my contact list). I still have all the FB and Gmail contacts.
I did a long hold on desktop and added a Phone contacts folder but how do I just add these to my contacts folder. Also I realize that there is a display option about only displaying contacts with numbers but my problem is the exact opposite.

Also is there any way to search your contacts when creating or forwarding a SMS or MMS?

You can get to the same needed screen, either by tapping PHONE, then the CONTACTS tab; or, just tap the CONTACTS icon.

Once within that Contacts-focused screen, hit the menu key. Then, choose DISPLAY OPTIONS. You will see your gmail account address, preceded with a round silver arrow pointing to the right. Tapping that gmail addy opens a drop-down list, reflecting your groups. You'll likely see that MY CONTACTS is pre-selected. Just tap the group you want. You may need to scroll, as ALL OTHER CONTACTS is listed last.

Tip: if you want to use ALL contacts, and your list is long-ish, you may want to try freebie StarContact. Makes it much easier to get to your desired contact, via a few taps per searching. OR, go into the website for Google Contacts:
.............. gmail >>> Contacts (on left), or
.............. http://www.google.com/contacts
where you can rework your group assignments, including your favorites (Starred). Will save you some taps long-term.

Yes, I have the same problem. I have a Droid, but according to Motorola Level 3 Tech Support, this is a problem with the Android operating system. Here is how the bug works, as far as I understand it:

BTW, I have already used the excellant feature on Google to Find Duplicate Contacts and Merge them. That feature, on the Gmail web site, finds all the Contacts with the same name, and at your option, merges *all* the data into one Contact, so no data is lost.

The problem is on the phone, in my case on the Droid. On the Droid (apparently all Android phones?), it finds all records which have a common tel number and arbitrarily will only display one of them. (No one can accurately tell me which one it chooses to display BTW.) The ones which are hidden from display do not show up in any searches.

Try this: Create two Contacts, say for Joe and Mary, with the same work tel for both, but give them each a different mobile tel. (Now that's a realistic example, right?) Be sure to create the contacts in Gmail, not on the Droid -- it might make a difference. (All of my contacts were initially on Gmail and then synced onto the Droid -- again a realistic example since the Droid is a newer product than Gmail.)

Now, go to the Droid and try to search for Joe. Now, try to search for Mary. I believe you will find one but not the other. Big problem!

Here's another weirdness -- whichever one is missing, now go to Gmail, and look up the mobile tel for the one which was hidden on the Droid. Now, manually dial the mobile tel on the Droid for the one which the Droid could not find when you searched. Surprise -- the name will pop up when it dials the number -- proving that the Contact is indeed on the Droid, but it is hidden.

Now, Motorola is calling this some kind of "merging" but I would call it instead "hiding" because the records are there and can be found individually by the Droid except when we (as users) are looking for them. Arghhh.

Help! I have over 3700 Contacts and over 300 of these records are hiding from view or searching. Major problem.

I had this problem.
Try with a sync tool like "Kylook" and hide on your Droid address book all accounts and shows only the Kylook one. You will see all contacts without duplications.
You can use the Kylook App to add / modify / delete contacts. This will be updated in seconds on the "original" droid adressbook.

This tool is free and allow to sync more than 1500 contacts, like in my case